Performance Royalties

As nearly two hundred artists, producers, engineers, and music professionals traveled to Washington DC for “GRAMMYs On The Hill” last week, now is a great time to review the status of an important and recurring issue facing recording artists. Artists and record labels, large and small, do not get compensated for the use of their recordings on AM/FM (“terrestrial”) radio. The recording industry would like to see a change in this area, so that working musicians (not just the superstars) can make a fair living making recordings that we as fans want to hear on our local radio stations. It costs money, time, as well as talent, to create great records.

There’s been a lot of back-and-forth regarding a recent court ruling that maintains the current royalty rates paid by Internet radio company Pandora to ASCAP, a 100 year-old performing rights organization (PRO) that collects money for AM/FM and Internet radio play then distributes that revenue to songwriters and publishers.

In the coming days, we hope to offer varying viewpoints from individuals and groups in this ecosystem. For now, we’ll try to demystify this decision and the licensing frameworks that informed it.

WASHINGTON, DC—Today, Representative Doug Collins (R-GA) introduced the Songwriter Equity Act, a bill meant to level the playing field for songwriters, composers and publishers for the use of their work.

The following statement is attributed to Casey Rae, CEO of Future of Music Coalition (FMC), a national non-profit research, education and advocacy organization for musicians.

“It is clear that songwriter and composer compensation is crucial to the health of the entire music ecosystem. Too often, songwriters are overlooked in the pitched debates about new business models and rightsholder royalties. Today’s legislation is important to focusing the conversation on those creators whose talents help power the music marketplace. read more

If you’re a copyright nerd (wait, you’re not?), you may have come across the issue of “pre-’72s.” In a nutshell, recordings made before February 15, 1972 are not protected by federal law, which can complicate how—or whether—royalties are paid for certain uses, like plays on internet or satellite radio.

Many people are unaware that there wasn’t even a copyright for recordings until 1972. Well, that’s not entirely true—some sound recordings made before ’72 are copyrighted at the state level. Still, federal protections are relatively new. At least when compared to compositions, which have been protected since the early 1800s (public performances of musical works came under federal law in 1897).

Debates about pre-’72 recordings might seem arcane, but there are major implications for today’s music ecosystem. First there’s artist compensation. The absence of a performance right for pre-’72s means that there’s no guarantee that recording artists are going to get paid fairly for the use of their work when played on Internet or satellite radio. (AM/FM broadcasters aren’t obligated to pay performers anything, though they do pay songwriters; more info on this crazy loophole here.) The lack of federal recognition also makes it more complicated for services to obtain a license to play music—and where there is no permission, there’s potential liability.

If you follow our work, you know that FMC are longtime supporters of a public performance right for AM/FM broadcasts. The reasons are simple: we think it’s crazy that recording artists in America recieve no compensation for the use of the work on good ol’ fashioned radio. The situation is even more galling when you consider that the rest of the developed world pays performers and sound copyright owners (often labels, but can be artists) for over-the-air plays. The US, as an exception, is in the not-so-terrific company of Iran and North Korea in not paying performers squat.

The Internet Radio Rate Wars continued this week, as performing rights organziation (PRO) ASCAP squared off against Internet radio giant Pandora in a federal court. The outcome could determine how royalty rates are set for PROs, webcasters, songwriters and publishers well into the future.

Last week, SoundExchange, the non-profit entity that collects and distributes digital performance royalties announced its plans to send out more frequent payments to eligible artists and labels. In the past payments were sent quarterly, but beginning this month payments will be deposited monthly.

As SoundExchange President and CEOMichael Huppe said, “By making performance royalties available sooner, we are making it easier for recording artists and record labels to focus on creating the music we all enjoy.”

This might sound like a minor accounting tweak. But for middle-class recording artists and struggling indie labels, it could be massively helpful. Here’s why.

Yesterday, on-demand music streaming service Spotifydid something pretty big by explaining in detail how it calculates and pays out royalties to rightsholders. With so many music industry pundits and practitioners in a tizzy about the economics of streaming, this move can be generally seen as positive. But as always, the devil is in the details.

It is certainly significant that Spotify took this step—probably long overdue—and we hope that it serves to increase the standard of transparency across the digital music sector. When a market leader like Spotify makes this kind of move, it can be a spur to other players to follow suit. However, it doesn’t really change much in terms of artist leverage on streaming on-demand services, nor does it impact most musicians and songwriters’ bottom lines. We spend a great deal of time considering this stuff—in fact, our own Kristin Thomson recently wrote a post for Music Think Tank about ways to make streaming music more viable for artists. (And if you need a primer on how the money flows on a variety of music platforms, check out these handy charts.)

Here at FMC, we regularly engage in a kind of protracted dialog with government through public comments and other filings that can extend over years (actually, thirteen and counting!). While we don’t claim to have all the answers, we do believe that our history of direct engagement with musicians, composers, independent labels, publishers, PROs, unions and others is useful for policymakers to consider as they grapple with the many questions facing creators in the digital age.

On Wednesday, Nov. 14, 2013, FMCfiled comments with the United States Patent and Trademark Office (USPTO) regarding their recent “green paper”—itself a product of the Internet Policy Task Force comprised of USPTO, the Department of Commerce and the National Telecommunications and Information Administration. Way back in 2010, we filed comments in the original proceeding that resulted in this year’s report, Copyright Policy, Creativity, and Innovation in the Digital Economy [PDF].

Future of Music Coalition filed the following comments with the United States Patent and Trade Office (USPTO) in an inquiry related to a previously published “green paper” from the Internet Policy Taks Force (a joint effort also including the United States Copyright Office and the National Telecommunications and Information Administration).